What to do with your lemons

How to Approach These "sub-perfect" companies in your own portfolio

The task with these portfolio companies isn't just to wait and hope; it's to be a proactive operator. The value you can create by turning a good company into a great one is often far more significant than the multiple expansion on an already perfect asset. This requires a three-step playbook.

Step 1: The Triage – A Brutally Honest Assessment

Before you can create value, you must first understand why the company is "adrift." This goes beyond the quarterly board deck.

• Financial & Operational Deep Dive: Go beyond the high-level P&L. Conduct a thorough analysis of unit economics. Where is the customer acquisition cost (CAC) too high? Why are certain sales channels underperforming? Are there hidden inefficiencies in churn?

• Benchmark Against Peers: Compare the company's key metrics (NRR, churn, CAC payback, LTV:CAC) not just to its historical performance but to best-in-class vertical SaaS leaders. This will objectively identify the "imperfections" and provide a clear roadmap for what needs to be fixed.

• Team & Leadership Capability: Is the current leadership team capable of executing a new, more operationally rigorous strategy? A founder who excelled at product development and early growth may not be the right fit to lead a data-driven, scalable GTM motion. Acknowledging this is the first and most critical step. But don't just think about changing management- it will be difficult to find a great new CEO. Think about supporting the current management team. They likely have great internal and industry knowledge and a desire to win. How can you bring them the skills/experience needed to succed.

Step 2: The Action Plan – The Operational Playbook

With a clear diagnosis, you can now deploy a targeted playbook to unlock value.

• Activate Your Operating Partners: This is where your firm’s operational talent can really drive outsized value. Instead of simply advising, they should embed themselves to help:

  • Automate Reporting: Implement dashboards for a single source of truth on sales, marketing, and customer success KPIs.

  • Optimize Sales & Marketing: Help build a scalable marketing engine, refine the sales playbook, or introduce a PLG element to reduce reliance on costly enterprise sales.

  • Instill Financial Discipline: Introduce a rigor around cash flow management and profitability targets. This makes the company more appealing to future buyers who prioritize efficiency.

• Identify M&A as a Growth Lever: If the company is in a fragmented market, it may be the perfect platform for a bolt-on acquisition strategy. Help them identify and acquire smaller players with complementary products or customer bases. This is a direct way to accelerate growth and consolidate market share.

• Make the Tough Capital Decisions: If the company is undercapitalized, new capital may be required. However, it should be tied directly to the execution of this new playbook, with clear milestones and KPIs. Avoid "throwing good money after bad."

Step 3: The Exit Strategy – Re-framing the Narrative

Your job isn't done until you've successfully exited. The turnaround you've led must be communicated effectively.

• Document the Transformation: Create a clear, data-driven narrative that highlights the journey. Show the "before" and "after" metrics, demonstrating the operational improvements and newfound scalability.

• Target the Right Buyer: The buyer for a "transformed" company is different from the one for a "perfect" one. The narrative should appeal to firms that value operational excellence and see the long-term potential of the platform you've built.

By following this proactive, hands-on approach, you can transform a company that was once "adrift" into a shining example of operational value creation, turning a challenging portfolio asset into a stellar return.

But how do you effectively drive change at the organization?